14 Steps to Buying a Home

Whether you’re an experienced buyer or buying your first home, it’s important to know that there are steps to follow when buying a house.  Buyers who attempt to purchase a house without a plan in place often experience disappointment or unnecessary stress.

If you’re an experienced buyer and you’ll be purchasing your fourth or fifth home, this 14 step guide to buying a house will act as a great reminder.

If you’re buying your first home, this guide may be your best resource as you navigate through the process of buying a house! 

Here are the steps:

1) Start researching and preparing before getting involved in the process

The internet has made it very easy for consumers to find out info relating to almost any topic. Real estate is no different.

For example, if you’re wondering if buying a foreclosure is a good idea, do your research before you go out and start looking at foreclosures.

Next, you will need to review your finances. It’s important to save for the largest down payment possible and plan for closing costs.

2) Check your credit score and history

Credit scores and payment history play a huge role in the ability to secure a loan to buy a house.

A mortgage lender will review your credit, but you should have a solid understanding of your credit history. Most mortgage lenders will require a minimum credit score of 620-640, depending on the type of mortgage loan. If your credit is not ideal, a mortgage may not be possible. Credit scores directly affect mortgage eligibility. Credit score and history also affect the mortgage interest rate. A buyer with a 800 credit score is likely to get a better mortgage interest rate than a buyer with a 620 credit score.

There are several websites that can help monitor your credit score and history. One of the many resources is freecreditreport.com.

3) Find great local real estate agent that you trust

This step will play a huge role in the overall success of the process of buying a home. An agent will assist you with securing financing (if needed), negotiate the best price and terms, and be your trusted adviser through the search, escrow, and sale.  

Things such as frequent communication, professionalism, honesty, and a proven track record are key traits you should expect from your real estate agent.

4) Get pre-approved from a local mortgage lender

The next step is to get pre-approved by a local mortgage lender. The primary reason why it’s smart to hire a local mortgage lender is because they understand the local real estate market and the local buying process.

Buyers who have a lender's pre-approval have a significant advantage over other home buyers who haven't been pre-approved for a home loan. Getting a pre-approval could be the difference between obtaining a dream home or not, should there be a multiple offer situation.

A real estate agent will have several recommendations to lenders that they’ve had good experiences with.

5) Learn about the local real estate market

Things to learn about, before buying a home: understanding what your money can purchase, how competitive a market is, how much homes sell for in the area, property taxes, mello roos, HOA fees, and tips about the different neighborhoods. A real estate agent will be able to provide information or recommendations to obtain information about the local real estate market.

6) Shop online for houses

Once you’ve completed the first five steps, you’re ready to begin shopping and visiting houses for sale. As you’re shopping for homes and deciding which homes you want to visit, always keep in mind what you need in a home and what you’d like. Make a list of needs and wants, to narrow down your search. Common needs include: amount of bedrooms and bathrooms, livable square footage, size of garage, location, and lot or backyard size. Common wants include: amenities like air conditioning, a pool, grass lawn for kids or pets, outdoor shower for surfers, and solar panels. 

While the internet has made it easy to see photos and facts, it’s also provides a lot of unreliable information. Some of the most popular real estate websites sometimes include information that is often inaccurate. The posted estimated home values have been known to be off by 20% or more, mostly due to the lack of information on comparable homes.

7) Visit a few homes

While it’s unlikely that the house that you purchase will match 100% of your needs and wants, you will find a few homes that match most of your criteria. As you’re viewing the homes, keep an eye out for red flags such as freshly patched areas on a ceiling, shoddy workmanship, odors, signs of water intrusion, and structural issues. Once you find a house has met all of your necessities, you’ve found the perfect one.

8) Make an offer on the home

Now that you’ve found the perfect home, it’s time to make an offer. There are details and decisions involved in an offer. One of the most important decisions is how much money to offer for the home. No home buyer wants to overpay for a home, but it’s nearly impossible to know how much a seller is willing to take for their home. There is a fine line between making a strong offer and an insulting offer, so be cautious when determining the price.

It’s recommended that as you decide how much money to offer for a home, you can lean heavily on your agent's expertise. An agent can create a comparative market analysis (CMA) or a list of comparable recent sales in the area. These tools can be a huge help when determining the price you’re going to offer.

In addition to offering a price, there are many terms and deadlines that you’ll also include in your purchase offer.

1. What is the target closing date? Does the seller need extra time to move out?
2. How large of an initial deposit (also known as the "earnest money deposit" or EMD) should you make?
3. Which common real estate contingencies will you include?
4. Will you request the seller to provide permits or documents?
5. Do you need to ask the seller to pay for a termite report and termite report clearance?
6. How fast can your lender try to get your loan approved (days or weeks)?

The offer price is very important to a seller, however, the terms and deadlines can also make or break a deal. It’s important that you, the buyer, fully understands each section of the offer. Lean on the expertise of your real estate agent to complete this step.

9) Complete inspections that apply to the home

After you make an offer and it gets accepted by all parties, escrow is opened, the title report is ordered, any applicable HOA documents are ordered, and the initial deposit (EMD) is due! The next step for a buyer is to complete any inspections that the offer was contingent upon. If one of the contingencies was a home inspection, there are a certain number of days you’ll have to complete the home inspection after acceptance of the offer. 

At this time, if your offer was contingent upon any other inspections, you must complete all inspections within a specified amount of days noted on the purchase contract, otherwise you could potentially lose out on your perfect house. Other common inspections to consider when buying a home include: a pest/termite inspection, a pool inspection, or a roof inspection. Tip: If you live in California, ask your real estate agent or transaction coordinator for the Buyer's Inspection Election (C.A.R. Form BIE).

10) Complete a formal mortgage application and work closely with your lender

After the inspection period is done and after any necessary negotiations are made, the next step to buying a home is to complete the formal mortgage application with your lender. Each lender requires different paperwork from you, including paycheck stubs, tax documents, and more, so check with your lender early and often during the escrow transaction. Sometimes mortgage lenders request updated bank statements, updated pay stubs, and letters of explanation on items that may appear on a credit report or explanation of large deposits into a bank account. Tip: delays in submitting information or documents to a mortgage lender may delay the sale of the home.

During the formal application stage, you should expect to pay for the bank appraisal. During this step, you’re also going to have the opportunity to lock in your interest rate.

Many buyers don’t understand the importance of the mortgage rate lock and skipping it can potentially be a mistake. Make sure to ask your lender about rate locks, and understand what it means to you, as the borrower, if the lender doesn’t explain it to you.

11) Bank appraisal is complete

A bank appraisal is performed by a third party appraiser, that is hired by the lender, to perform an evaluation of the subject property. The primary responsibilities of a bank appraiser are to determine that the home sale price is fair for the current market, and to ensure there are no safety issues with the house. Appraisers will be looking for safety items such as peeling paint (which may contain lead), broken windows, a roof in poor condition, and a handful of other potential safety problems. Any repairs resulting from an appraisal (this is not common) must be completed and re-inspected prior to the lender approving the funding for the borrower.

12) Perform a final walk-through

Once the close of escrow date approaches, the next step to buying a home is to perform your final walk-through (this typically occurs within 5 days before the close of escrow date). The final walk-through is the buyers right to walk-through the home one last time before the close of escrow, to ensure things are like they were when the purchase offer was written. The final walk-through also provides the time to check on the completion of repairs that were agreed upon, from any inspections were completed. At the time of the final walk-through, it's recommend to test the HVAC systems, plumbing, lighting, and anything else that may be of concern.

If something at the final walk-through is found to be in need or attention or repair, it’s critical to inform the real estate agents involved in the sale immediately, so that a resolution can be made before the closing date and time.

13) Closing escrow

Before closing escrow in San Diego, you’ll be signing quite a few escrow documents and loan documents that finalize the sale of your new house. In San Diego, it's common that an escrow officer will be available to walk you through the documents. If you live outside of San Diego, consult your real estate agent for closing details in your state or city.

Prior to closing escrow, it is recommended to call all necessary utility companies to transfer or start services on the day that escrow is scheduled to close. Some utilities that may apply to your home include: water, trash, sewer, propane, gas, electric, cable, phone. Some sellers will offer a list of utility companies for a buyer to contact.

Closing day is here, congratulations! Buying a house is one of the most exciting events in life and once the home sale has been recorded at the County Recorder's Office, you will receive the keys to your new home.

14) Move in and complete any post-closing tasks

Once you get settled into your new home, there are a few tasks that you should consider completing. Below are some of the suggested possible post-closing tasks:

1. Change the locks on all doors
2. Change your address with United States Postal Service
3. Inform employers, schools, and other important establishments of your new address
4. Meet the neighbors
5. File your closing statement so you have it ready for tax time